Health Insurers Move Ahead, With Or Without Individual Mandate

For the health policy world, the Supreme Court's tough questioning of the individual mandate last week was a seismic event.

But in Hartford, Conn., the city sometimes called the epicenter of the insurance industry, David Cordani isn't quaking.

Cordani is the CEO of Cigna, the nation's fourth-largest health insurer. He says the insurance industry started changing itself before the Affordable Care Act became law in 2010. And the changes will continue regardless of what happens at the high court.

"The broader health care debate is way larger than the individual mandate," Cordani said during an interview in his sunny corner office, just a few hours after some of the justices seemed ready to strike down the mandate.

Cigna, like the broader insurance industry, hasn't taken a position on whether or not the mandate requiring Americans to buy health coverage is constitutional. Cordani points out that it really only deals with expanding care to people in the small-group and individual markets. That's a fraction of the total number of people insured, and it's not a major market for Cigna.

Cordani says the act does a fair enough job at expanding access to care, but it doesn't do as much to improve the quality of care and drive down costs. That's his focus: changing the way we think about insurance, from paying for "sick care" to paying for "health care," driving consumers to stay healthy and giving doctors incentives to keep them that way.

"What we've been doing is innovating programs around that, with or without the Affordable Care Act," Cordani says.

He says Cigna is still deciding how and where to sell insurance in the new exchanges — the health insurance marketplaces that will open for business in 2014. That's not exactly easy, according to Tom Wildsmith of the American Academy of Actuaries. Actuaries evaluate future risk, and Wildsmith says what's keeping them up at night is trying to figure out whom they're going to be covering next year.

"The challenge with health care reform is that it injects some uncertainty in the system that means that, even in the aggregate, we don't know exactly how things are going to work out," he says.

Even if all of the rules were set in stone, there's still uncertainty about who will be in a particular insurer's risk pool and what the Supreme Court will do.

Among insurer worries: If the mandate goes, will the young and healthy buy in, or will they wait until they are sick to buy insurance? And what if a state's new baseline coverage — called essential health benefits — is just too expensive?

"If essential health benefits package means that many of their customers will have to buy up from a Yugo to a Chevy, they are concerned that they may lose some customers in the buy-up process," Wildsmith says.

Karen Ignagni, CEO of America's Health Insurance Plans, the industry lobby, says insurers aren't waiting to find out. They're working with hospitals and doctors to change the way care is paid for and to keep costs down, just as Cigna's Cordani wants. She cites two studies that say Medicare plans run by private insurers are succeeding at keeping seniors from being readmitted to the hospital after procedures.

"We're leading the way, according to government data on re-admissions," she says. "That's a win-win on both sides. There's real data now to support the contention that these strategies and these tools work very, very effectively."

What wouldn't work, Ignagni says, would be to ditch the individual mandate and still make insurers continue to accept all comers regardless of the status of their health.

"In every state that tried market reforms without bringing everyone into the system, we saw those markets blow up," she says.

Insurers will be just fine — particularly if the part of the law that subsidizes insurance for lower-income Americans survives the Supreme Court challenge, according to Mila Kofman of Georgetown University's Health Policy Institute.

"We're looking at billions of dollars into the pockets of the health insurance industry," says Kofman, a former superintendent of insurance in Maine. "So I'm not worried about the health insurance industry and their financial health at all. This is going to be very good for their bottom line."

In fact, even on the day the Supreme Court looked like it was ready to toss the individual mandate, Cigna's stock was up 4 percent, and other insurers saw similar gains.

The health insurance industry is trying to prepare for an uncertain future. The Supreme Court is mulling the fate of the federal health overhaul. But whether the health care law is overturned or not, people are still likely to see changes to their insurance plans.

Jeff Cohen from member station WNPR reports.

JEFF COHEN, BYLINE: If you talk to some people in the insurance industry, the worst-case scenario is that the court throws out the heart of the health law; the requirement that everyone have health insurance or pay a penalty.

Karen Ignani says that would mean real problems, at least when it comes to the goal of providing lower premiums to more of the nation's uninsured.

KAREN IGNANI: In every state that tried market reforms without bringing everyone into the system, we saw those markets blow up.

COHEN: Ignani is the CEO of America's Health Insurance Plans, the insurance lobby. And they've been clear from the start. You can't ditch the individual mandate and still make insurers continue to accept all people regardless of the status of their health. The math just doesn't work. Not everyone agrees.

Mila Kofman used to be the superintendent of insurance for the state of Maine. Now, she's a research professor at Georgetown University. She says that should the mandate not survive the legal challenge, the right subsidies could entice people to buy insurance.

MILA KOFMAN: It's not that most people choose to be without coverage because they're buying Porsches; it's that they cannot afford it.

COHEN: David Cordani is the CEO of Cigna, the nation's fourth largest health insurer. He's in his bright, big-windowed corner office just outside Hartford, the city often called the insurance capital of the world. And as the Supreme Court was challenging the Affordable Care Act, Cordani didn't seem phased. Whatever happens with the mandate happens with the mandate.

DAVID CORDANI: Cigna does not have a position relative to the constitutional nature of it. And the broader health care debate is way larger than the individual mandate.

COHEN: Cordani agrees with Kofman that there are other ways to create what he calls a value proposition, to get people to buy insurance should the mandate disappear. But he also says this: The effort to change the way we provide and pay for the nation's health care is bigger than just what happens to the individual mandate. The focus, he says, should be patient health - improving the quality of care and driving down its cost.

CORDANI: Those are exciting opportunities, where you're really moving from sick care to health care, which is a lot of what motivates us.

COHEN: That's happening regardless of what happens with the Affordable Care Act?

CORDANI: Absolutely.

COHEN: It's important to keep in mind that insurers like Cordani are in many cases planning as though the Affordable Care Act is the law of the land because, for now at least, it is. And that means building products for the new insurance marketplace come 2014.

But insurance actuaries, who help insurers quantify risk, are up all night trying to figure out who they're going to be covering next year. Tom Wildsmith is the vice president for health issues at the American Academy of Actuaries.

TOM WILDSMITH: The challenge with health care reform is that it injects some uncertainty in the system that means that even in aggregate, we don't know exactly how things are going to work out.

COHEN: Complicating things is this: Even if all of the rules were set, no one knows just who will be in a particular insurer's risk pool. And the Supreme Court's pending decision only increases that uncertainty. So, for instance, what if a state's new baseline coverage - called its essential benefit package - is just too expensive for consumers?

WILDSMITH: If the essential benefit package means that many of their customers will have to buy up from, you know, a Yugo to a Chevy, they are concerned that they may lose some customers in that buy-up process.

COHEN: It may not be the easiest math in the world, but Mila Kofman says insurers can handle it.

KOFMAN: We're looking at billions of dollars into the pockets of the health insurance industry. So, I'm not worried about the health insurance industry and their financial health at all.

COHEN: In fact, even on the day that the Supreme Court looked like it was ready to toss the individual mandate, Cigna's stock was up 4 percent and other insurers saw similar gains.

For NPR News, I'm Jeff Cohen in Hartford.

SIEGEL: And that story is part of a partnership that includes WNPR, NPR and Kaiser Health News. Transcript provided by NPR, Copyright NPR.